For years, Wall Street research firms haven’t known for sure if clients are reading their analysts’ reports. Now a Canadian startup is bringing transparency to financial research.

Toronto-based Street Contxt, founded in 2012, helps analysts — and their bosses — track which clients are reading what. Figuring that out isn’t merely a feel-good exercise. The more clients read the analysis, the more the research firms can charge, at least theoretically. On the other side, brokerages that subscribe to Street Contxt can see what research is being most read and get reports from small firms they might not otherwise have access to.

“I would not want to be out having these discussions with clients without this kind of data now,” said James McKeough, an analyst at Montreal-based Pavilion Financial Corp., which uses Street Contxt to get insights into Pavilion’s macro-economic research. “It has positively affected our ability to get paid.”

Blair Livingston, chief executive of Street Contxt, said his service is tailor-made for modern investing because electronic trading has taken away the edge the fastest human traders once had, meaning access to the best knowledge and research is becoming more important.

Wall Street seems to be buying his pitch. Half of the world’s top 20 brokerages have signed up for Street Contxt, Livingston said. The firm has raised about US$11.5 million; its investors include executives from Royal Bank of Canada, JPMorgan Chase & Co., Wells Fargo & Co. and venture capital firm Formation 8.

The concept isn’t completely new. Some firms use e-mail marketing tools such as Mail Chimp to track open and click rates. New York-based Blue Matrix already tracks who’s reading what. Street Contxt wants to take that a step further, Livingston said. It builds software that scans research reports for key words and themes and automatically builds a profile for readers that can still be used even if that person changes e-mails or firms.

Street Contxt’s real potential lies in being able to create a larger marketplace for distributing and finding research, Livingston said. Investors could pay on a per-report basis rather than paying big one-time fees for all of a firm’s research. Analysts could initially offer their reports for free to garner interest and new readers.

As marketplaces such as Street Contxt become the go-to place for finding the best research, smaller research firms will be able to compete with content from the biggest banks, Livingston said. Instead of reading notes from the same five analysts each day, investors can see what’s trending in the rest of the financial community. Street Contxt can also recommend new reports based on a reader’s past interests.

The germ of Street Contxt formed when Livingston was working for Brad Katsuyama, whose efforts to create IEX — a new stock exchange that erases any advantage enjoyed by high- frequency traders — are detailed in Michael Lewis’s book Flash Boys.

Cole Burston/Bloomberg

Working with Katsuyama was an apprenticeship of sorts, Livingston said. “I learned every startup lesson in the span of a year,” he said. “How to be an evangelist, which he really was, doing something really new, the importance of picking your shareholders and stakeholders very closely.” Livingston also can look to his brother, Ted Livingston, the CEO of Kik, a Canadian messaging application with a valuation of US$1 billion.

It was clear electronic trading and dark pools such as IEX were making it harder for banks to differentiate themselves by their technology, Livingston said. That makes the ability to track and assign value to value-added services such as research all the more important, he said.

Analysts who sell their research to investors are “trying to make sure they’re spending their time and effort on the right information for the right clients,” said Kevin McPartland, an analyst with Greenwich Associates, a financial services advisory firm. “This feels like the kind of product that really helps with that.”

Street Contxt has attracted support and investment from a roster of retired Wall Streeters including JP Morgan’s former head of business development and strategy Jay Mandelbaum and the former chief technology officer of UBS Andy Brown.

“This capability is something that’s needed in the market in a big way,” Brown said. He invested after meeting Livingston and being impressed with his ability to win over long-time finance professionals, he said.

Formation 8, whose previous investments include the virtual reality startup Oculus acquired by Facebook in 2014 for US$2 billion, followed up on an earlier seed investment in Street Contxt by leading an US$8 million funding round in January.

“There was a mass amount of interest in what he was doing,” said Drew Oetting, a partner at Formation 8, which led the investment. Livingston “was able to find some of the largest middle market firms and that was real validation for us.”

If analysts are worried about competing in a more open and transparent way, they’re stuck in the past, Pavilion analyst McKeough said.

“This is the way it is now and if you don’t like it then I don’t know what to tell you. People have to be reading your stuff,” he said.

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